Artificial Intelligence Powering Boom in Israel’s Digital Health Sector

TEL AVIV, Israel, 16 April 2019–Israel’s reams of electronic medical records –health data on its population of around 8.9 million people– are proving fruitful for a growing number of digital health startups training algorithms to do things like early detection of diseases and produce more accurate medical diagnoses.

According to a new report by Start-Up Nation Central, the growth in the number of Israeli digital health startups –537 companies, up from 327 in 2014—has drawn in new investors, including Israeli VCs who have never previously invested in healthcare. This has driven financing in the sector to a record $511M in 2018, up 32% year on year. By the first quarter of 2019 the amount raised was already at $214M.

Of the $511M, over 50% ($285M) went to companies in decision support and diagnostics which rely heavily on data crunching. Overall , 85% ($433M) of the sector’s total financing went to health companies relying on some form of  machine learning–a clear trend showing AI in the ascendancy.  AI medical use cases include but are not limited to decision support tools for physicians, medical imaging analysis using computer vision, and big data  analytics for population health management.

Also in 2018, new dedicated healthcare VCs were set up, and in early 2019 the largest ever venture capital fund raised in Israel, aMoon’s $660M fund, was earmarked for late stage health investment. Local and global hospital systems have started creating new joint ventures to test local startup technology, and the HMOs themselves are also establishing new innovation partnerships.

The electronic medical records have been gathered gradually over the past 25 years from the country’s 4 main health maintenance organizations (HMOs), allowing startups  an increased ability to train and test artificial intelligence solutions, and partner with HMOs to validate their technology from early stages of development.

“With the combination of strong technological expertise and access to data, Israeli decision support companies, most of which utilize AI technologies, have been able to flourish, and have attracted increased levels of funding,” the report states.

Other important developments noted in the report:

An increase in Israeli investor activity in the sector: 124 investors invested in digital health companies in 2018 compared to 100 in 2017, with the growth coming mostly from a 66% increase in the involvement of Israeli investors, from 33 in 2017, to 55 in 2018.  The data indicates increased local confidence in the sector, providing start-ups with support and expertise on the ground.

An increase in the number of later stage rounds: rising from 7 disclosed B and C+ rounds in 2017 to 12 in 2018. The combined capital raised in disclosed B and C rounds amounted to 50% of the total financing for the year compared with 30% in 2017. 17 investment rounds raised more than $10M each (80% of sector funding) in 2018 compared to 12 rounds in 2017 (68% of total funding). This indicates the sector’s maturation and availability of later stage funding, mostly from institutional investors.

Foreign hospitals and universities are increasingly coming to Israel to look for Digital Health technologies and to invest in local companies. For example, in 2018, three major US hospitals engaged with Israeli digital health: Intermountain Healthcare’s investment in Zebra Medical, Mt. Sinai Ventures’ contract with digital speech therapy company Novotalk, and Thomas Jefferson University’s pilot validation program in conjunction with the Israeli Innovation Authority for clinical care and hospital operations solutions.

Start-Up Nation Central’s report on Israel’s Digital Health industry offers a comprehensive and up-to-date analysis of the state of the Israeli Digital Health ecosystem and its trends.